Monday, May 3, 2010

The Earnings Picture

Yes…and it really is a picture.  With all the ink spilled on the bad news headlines over the past four weeks, I thought it would be a good time to see just how good the earnings looked directly, and to compare them side by side with everyone reporting.  Organizing the Earnings Season in one place seemed to be the most reasonable way to find companies that are moving out of synch with their peers.  Because I concentrate on stocks that trade listed options, about 1,000 of the stocks in the universe I follow have reported.  The first landscape shows all stocks that beat estimates in green.  Stocks that beat estimates by 25% or more are darkest green.  The Earnings Landscape is the color of money as it turns out.  There is a lot of green out there.  Issues in white are even with earnings expectations and red issues are below expectations. The height of each building is total 1 month returns (buildings above the horizon are positive shown in first figure).    Negative returns are below the horizon and shown in the next figure.  You can see that most of the stocks that beat estimates by 25% or more are up for the last month.  I highlighted SUN in the Energy GICS Sector that had beaten estimates by the greatest percentage and is also in positive territory for the last 30 days.  All issues that had the highest return AND were up the most in the last 30 days are sorted from lower left to upper right within each GICS sector.SUN-Earnings1

Now - lets flip the landscape over (Below -building height is now negative returns) so we can see who had positive earnings relative to estimates AND had negative returns for the last month.  I picked the Energy Group  because I noticed a company that beat estimates by a solid amount (+60%) but was down the most for that group.  The building stood out across the entire landscape.   After I zoomed in I discovered it was Massey Energy (MEE) and the stock is suffering from the mining tragedy.  As I clicked through, I noted British Petroleum (BP) swooning on the oil spill, and Diamond Offshore (DO) had beaten estimates - but were the worst performers in the Energy Group that posted positive earnings surprises besides MEE.  This only took a couple of seconds to spot using my software, AlphaVision from Aqumin.  All these names have been in the news lately for various reasons, none of them good (except earnings news).  DO (at 8.5 PE ratio) catches my interest because it beat estimates but lagged peers in performance over the last 30 days.  Off to check the options…

MEE Earnings

The opinions expressed by the author are his alone, and do not reflect the opinions of Aqumin LLC, its shareholders, partners or affiliates.

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